Risk Taking Begets Risk Taking: Evidence from Casino Openings and Investor Portfolios

49 Pages Posted: 5 Aug 2015 Last revised: 30 Sep 2017

See all articles by Chi Liao

Chi Liao

University of Manitoba - Asper School of Business

Date Written: September 27, 2017

Abstract

This paper provides evidence that a change in the surrounding risk-taking environment, via increased casino access, affects investors' subsequent willingness to take portfolio risk. Using the initial legalization and opening of commercial casinos in the United States as a quasi-natural experiment and investor-level brokerage data, we find that after a casino opens in close geographical proximity to investors, individuals likely to visit a casino and gamble increase their idiosyncratic portfolio risk by 12.86% relative to those unlikely to gamble. This effect lasts for approximately 3 months and does not result in higher subsequent portfolio returns.

Keywords: investor behavior, portfolio risk taking, gambling

JEL Classification: D10, G10

Suggested Citation

Liao, Chi, Risk Taking Begets Risk Taking: Evidence from Casino Openings and Investor Portfolios (September 27, 2017). Available at SSRN: https://ssrn.com/abstract=2639700 or http://dx.doi.org/10.2139/ssrn.2639700

Chi Liao (Contact Author)

University of Manitoba - Asper School of Business ( email )

181 Freedman Crescent
Winnipeg, Manitoba R3T 5V4
Canada

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